Analysis: The Most Likely Next Coinbase Listing

A deep look at the fundamentals shared by Coinbase listings, and a future candidate.

A Coinbase listing is the crypto equivalent of the Holy Grail for the community behind a token. Aside from the obvious benefits – including an exponential spike in the price and volume for any coin lucky enough to make the grade – Coinbase listings expose tokens to a much wider audience, increasing the long-term prospects of mass adoption.

The purpose of this article is to provide an analytical framework for decision-making (must be the management consultant background in me…). Investing purely on the speculation of a listing on any exchange is very short term focused and may be suited for investors with higher risk tolerances, but a Coinbase listing has five immediate benefits for any coin:

Liquidity: GDAX, the trading app owned by Coinbase for professional crypto traders, is a top 8 exchange globally in terms of volume per day. A listing provides immediate liquidity in a cryptocurrency market that does over $310 billion in volume per day.

Access: Over 85% of GDAX’s volume is on USD pairs. It gives a market opportunity to exchange fiat for cryptocurrency, and Coinbase is arguably considered the most responsible platform to do so. Coinbase has been described as the platform you’d share with your grandmother to get into cryptocurrency for the first time due to their exceptional Ux design. There are few avenues for a green, inexperienced, non-technical investor to buy cryptocurrency for the first time, and Coinbase is often the place they are directed.

Familiarity: Having USD pairs makes it easier for your average investor to conceptually understand their investments. People are more familiar with pricing assets in dollars versus satoshis (the smallest denomination of bitcoin), and therefore they are more comfortable using USD as their baseline. For example, buying Cardano (ADA) at $0.35 USD per coin is conceptually easier to interpret than buying ADA at 4000 satoshis.

Advertising: A listing will inherently attract the attention of all mainstream crypto media outlets. In addition, since Coinbase is generally a new investor’s first interaction with crypto, it gives a new group of crypto investors an introduction to the currency. It’s also a cyclical effect that benefits from word of mouth marketing.

Legitimacy: Coinbase aims to be the most trusted cryptocurrency company in the space according to their Chief Compliance Officer, Mike Lempres. A fundamental component of reaching that goal is compliance, and a listing on Coinbase confirms the integrity of a coin to the public. They’re a trusted entity and it’s expected that they’ve done their due diligence in the process of listing.

Let’s take into consideration four examples that show the short-term influential power that Coinbase has over the market.

Litecoin (LTC): Coinbase added support for LTC on May 3rd, 2017. In the next 5 days LTC jumped approximately 57%.

Bitcoin Cash (BCH): Went up over 300% in one day once it was added to Coinbase. This infamous hour of trading saw BCH priced at $8500 on Coinbase and as low as $3800 on other exchanges, such as Binance.

Ripple (XRP): XRP listing rumours are very common, but the coin still hasn’t been listed. Information surfaced that Ripple offered to pay Coinbase to list their coin and they declined. The latest rumour in early March saw XRP spike almost 20%.

Every Telegram channel and Reddit page has someone arguing that their coin is going to be the next listing on Coinbase, but it’s important as an investor to use an analytical lens when making financial decisions.

There are rumours every day, and with the recent announcements of the launch of Coinbase Ventures, added support for ERC20 tokens, the acquisition of Earn.com, filing Form D paperwork with the SEC to sell regulated securities, and high-profile hires to scale their team, speculation of the next coin listing has been extremely rampant.

I’ve developed a framework that investors should use to educate themselves and empower their own decision-making on what they think the possibilities are for the next Coinbase listing.

These questions contain objective and subjective variables for investors to answer, and different investors may come to different conclusions, but it establishes a structure to avoid the erroneous noise that crypto media is famous for.

I’ve ordered these in order of importance from my perspective, but the weighting of each criteria can be changed based on personal preferences.

Coinbase announced their listing requirements for a coin in Q4 of 2017, but the company still retains full and absolute discretion for listing or delisting any asset, so meeting the requirements is just step 1 of the framework. These requirements include: strong alignment with Coinbase’s mission and values, engineering and product quality, short & long term operating expectations, ability to scale, liquidity, global exchange representation, token demand, and economic incentives to encourage for participating parties.

Is the coin considered a security?

The asset cannot be classified as a security in accord with US Securities Law. However, Coinbase has filed to become an SEC licensed exchange, and if that does happen I assume they will change their framework to accommodate coins that are classified as securities.

Does the asset meet compliance obligations?

These obligations include an Anti-Money Laundering Program.

Is the coin an ERC20?

Coinbase added support for ERC20 tokens in late March. Allocating resources on a task like this suggests that the next listing could likely be an ERC20, but this is not definitive. It’s important to evaluate whether or not the coin has plans to move to their own mainnet in the near future (such as EOS).

Does the token reward users for participation?

When Coinbase acquired Earn.com, Brian Armstrong, Coinbase’s CEO, tweeted about his interest in investing in platforms that directly rewards users for participation.

Are there any Y-Combinator connections?

Coinbase is a Y12 alumni and Y-Combinator has a strong alumni network.

Are there any employee relationships?

Charlie Lee, creator of Litecoin, was the former Director of Engineering at Coinbase. Personal connections to Coinbase are definitely considered to be an added bonus when considering the chance of a listing.

Any other considerations?

Some other important considerations are geography and the fact that Coinbase announced last month that listings will not merely be according to the market capitalization of a coin, which means it’s likely that coins over a certain threshold all have an equal playing field when evaluating their probability of being listed. There is also no reason that Coinbase only needs to add only 1 asset at a time, and there could potentially be a bundle of ERC20 coins listed.

Based on this framework I’ve narrowed down the three most probable token listings: 0x (ZRX), Augur (REP) and Quantstamp (QSP).

I’d consider 0x to be the most probable listing. 0x meets the digital asset framework, it has been rumoured that 0x executives have visited the Coinbase office (and their offices are an 8-minute drive from one another in San Francisco), both 0x and Coinbase filed for Form D paperwork with the SEC back-to-back within 2 weeks time, Coinbase could use the 0x protocol to exchange its ERC20 tokens, 0x is an ERC20 token, and they are a top-50 market cap coin.

To top that off, 3 out of 4 of 0x’s advisors listed on their website are ex-Coinbase employees: Fred Ehrsam was a co-founder, Olaf Carlson-Wee was the first hire, and Lina Xie was a project manager.

It may seem strange to list a coin on their platform that could be perceived as a future competitor as Coinbase, but in the announcement of Coinbase Ventures, the company announced that they may “invest in companies that ostensibly look competitive with Coinbase”. Coinbase Ventures investments may not be directly correlated with listings in their exchange, but they also mentioned that they would like to invest in projects that are in everyone’s interest to see the ecosystem innovate by taking a long-term view of the space.

It seems as though Coinbase lists a new coin approximately every 9 months based on the timeline history of listings. With that in mind, one may believe the listing could be soon – but don’t keep your hopes up.

Dan Romero, General Manager of Coinbase, indicated that the company wants to increase its offerings, but the regulatory uncertainty when classifying security and utility tokens is keeping them from rushing into anything. It’s almost certain that no coins will be added until the SEC develops a framework to classify tokens.

Andrew Macdonald is a cryptocurrency market analyst at a Canadian-based fintech firm. He has a background in management consulting at Deloitte where he worked with several global clients on supply chain transparency solutions using blockchain technology. He attended Queen's University where he wrote his thesis paper on blockchain business disruption and graduated with an honours Bachelor of Commerce with a specialization in finance. In his spare time he enjoys playing hockey, doing CrossFit, golfing and taking care of his Australian shepherd puppy.

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